Barclays Upgrades PulteGroup, Says Its Management Concerns Are Overblown

Shares of PulteGroup, Inc. PHM have plunged more than 5 percent in the last 5 trading days. Barclays’ Stephen Kim upgraded the rating for the company from Underweight to Equal-weight, while maintaining a price target of $18.

PulteGroup has been focusing on improving its profitability, and has a best-in-class balance sheet, analyst Stephen Kim noted. He added, however, that the shares had been trading at a considerable premium to other large cap builders.

“Given the recent pullback, due largely to a dispute with the company's founder, PHM now trades at a discount to these same large cap peers, which we believe more than sufficiently discounts any management-related uncertainty,” the analyst wrote.

Concerns On Management Strategy Overblown

There is uncertainty surrounding CEO transition process. Kim said, however, that PulteGroup’s long-term strategy will remain unchanged. He further commented, “Overall, we do not believe that the Board is currently entertaining any material shift in the company's balanced approach to growth and share buybacks.”

The upgrade in rating follows the underperformance of the recent company’s shares, and the concerns surrounding management appears overblown, Kim added.